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Listed Below Are Six Profitability Ratios Followed by a List

Question 141

Matching

Listed below are six profitability ratios followed by a list of phrases that describe or characterize the ratios. Match each phrase with the correct ratio placing the number designating the ratio in the space provided.

Premises:
Compares a company's share price with its earnings per share.
Net income divided by average stockholders' equity; measures the income generated per dollar of equity.
Net sales divided by average total assets; which measures the sales per dollar of assets invested.
Gross profit divided by net sales; measures the amount by which the sale price of inventory exceeds its cost per dollar of sales.
Net income divided by net sales; indicates the earnings per dollar of sales.
Net income divided by average total assets; measures the amount of net income generated for each dollar invested in assets.
Responses:
Price-earnings (PE) ratio
Return on assets
Profit margin
Gross profit ratio
Asset turnover
Return on equity

Correct Answer:

Compares a company's share price with its earnings per share.
Net income divided by average stockholders' equity; measures the income generated per dollar of equity.
Net sales divided by average total assets; which measures the sales per dollar of assets invested.
Gross profit divided by net sales; measures the amount by which the sale price of inventory exceeds its cost per dollar of sales.
Net income divided by net sales; indicates the earnings per dollar of sales.
Net income divided by average total assets; measures the amount of net income generated for each dollar invested in assets.
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